By Jingyan Fu and Artie W. Ng
Since the reform and opening-up programme was implemented, China has witnessed tremendous social and economic progress. Between 1978 and 2018, the average GDP growth rate was over 9%, with a positive growth rate in 2020. The need for energy has grown as a result of fast economic expansion, resulting in a mismatch between supply and demand. China has recognised this impact and has attempted to persuade the top five state-owned enterprises (SOE) in the generating industry to improve their energy efficiency, utilise cleaner coal, and include renewable energy into their energy mix.
Solar PV electricity has grown dramatically in the last decade, becoming the third-largest source of renewable energy. Solar PV power (713.97 GW) has become an important renewable energy resource, second only to hydropower (1739.88 GW), and has made substantial contributions to fulfilling global energy demand and sustainable development. Within the newly installed worldwide capacity of Solar PV, China accounted for the highest proportion of 49 GW (cumulative 254.35 GW) in 2020, with 126.84 GW (cumulative 713.97 GW).
A Step Towards Carbon Peak
Traditional fossil fuel energy has accounted for more than 80% of China’s energy mix over the previous 40 years. Extensive use of fossil fuel energy has created a significant tension between socioeconomic progress and environmental pollution, undermining living conditions and jeopardising the economy’s long-term viability. RE accounted for 15.17 percent of China’s energy mix by the end of 2019, a massive increase from 9.7 percent in 2012. A change in the current RE share from 15.9% (2020) to 20% (2030) is required to meet the aspirational aim of carbon peak by 2030.
Benefits from Free Trade Policy
China’s opening-up policy has encouraged Chinese companies to participate in the import and export trade. China’s solar photovoltaic (PV) business has traditionally been export-oriented. According to data, China’s solar PV goods were shipped to more than 200 countries and regions in 2020, totaling 98 GW, providing for the worldwide growth of RE and environmental protection.
Despite the fact that solar PV electricity is unlimited, clean, and has zero emissions, the desired initial investment per kWh is too costly, resulting in a higher LCOE. As a result, it can’t compete with traditional fossil fuel energy, which is why solar PV power has been slow to grow.
Technological Opportunities Analysis of Solar PV
Solar PV power generation is based on the photovoltaic effect concept. The effect implies that silicon-based semiconductors can convert sunlight into direct current (DC) power. Inverters transform DC current into alternating power, depending on the application. As a result, the intensity of solar radiation is a must for any country or location to generate solar PV electricity. According to the Global Solar Atlas (version 2.0), China’s yearly solar radiation ranges from 968 kWh/m2 to 2117 kWh/m2, with an average intensity of 1485 kWh/m2.
Political Challenges Analysis
Uncertainties of Policy
Incentive policies have been consistently demonstrated to be critical for launching and driving the growth of solar PV electricity. Investors will get investment returns in the following 20 or 25 years by running the ready-established fixed assets once the first investment is completed, due to the large initial investment amount of solar PV power generation.
Prior to 2020, practically all solar PV power plants developed in China relied on the addition of FIT to generate a profit. State-owned grid utilities collected the FIT subsidy from energy end-users as renewable surcharges, which were subsequently disbursed to project owners to bridge the tariff difference between the FIT rate and the coal-fired power rate. A preferential value-added tax policy has been announced twice by the Chinese government. However, each regulation is only valid for three years; participants in solar PV generation, like those in wind and hydroelectric, want a long-term answer.
Fragmented and Backward Policies
Solar PV electricity generation is a complicated process. Many government regulators are engaged in the creation, building, and operation and maintenance of projects. There have been instances where regulators clashed, resulting in the decommissioning of a commercially operating solar PV power plant. These new modalities necessitate revised green policies as well as collaboration between regulators and market participants. To promote the growth of solar PV power, cross-sectoral collaboration is required to remove barriers and remove hurdles, opening the path for sustainable development and the 2030 carbon peak mission.
Invisible and Unforeseen Policies of Local Government
China’s national governing structure is extremely centralised. The central government’s role is to develop macro policies, while local governments are in charge of implementing and carrying out such policies. Local governments have been particularly active in putting the central government’s advocacy for an innovation-driven development plan into practise by constructing SEIs.
China has created an optimal industrial structure based on unique regional advantages for the industry-for-resource interchange idea. Polysilicon and silicon wafers with high energy consumption are widely disseminated in Yunnan, Inner Mongolia, and Xinjiang, where power is cheap. Jiangsu and Zhejiang are home to solar PV cells and panels with advanced technology and a strong reliance on the industrial supply chain. In this instance, businesses must pay monetary “donations” as extra policy expenses in order to gain the approval of the local government and secure commercial possibilities.
Potential Emerging Unexpected Taxes and Fees
Favorable and flexible land-use regulations, as well as advantageous tax policies, are among the government’s supportive policies for the growth of solar PV power. Unused, salty, desertification, and arable land are among the categories of land that can be used for solar PV electricity, according to the land-use policy.
The government encourages innovative solar PV projects, such as those that are combined with greenhouse roofs, fishpond farms, or wastelands. Rather than acquiring these lands, investors might lease them. Solar fishpond farms are tax-exempt for arable land and other solar PV power plants, such as solar greenhouse rooftops. Similarly, certain villages in China are referred to as towns for regional administration reasons, and solar PV power installations located outside of metropolitan areas are likewise tax-exempt.
Suggestions for Government Policymakers
Industrial policies that encourage the development of renewable energy sources are critical. Policy consistency and enforcement are critical for the long-term growth of solar PV electricity. The investment returns of running solar PV power facilities have declined due to delays in subsidy payments, chronic RE electricity curtailment in northern regions, and inconsistent tax regulations. Policymakers must find a solution.
Emerging solar PV power applications necessitate the abolition of the bureaucratic system’s fragmentation; multi-tiered cross-sectoral governance between the energy administrator and other connected sectors is required. A new transparent evaluation approach for assessing the overall advantages of new solar PV applications is required.
Project finance was a well-known short-term funding option for Res, and green finance has been shown to have a significant influence on speeding up the shift to sustainable development. Banks and financial institutions now do not treat SOEs and private investors fairly.
Direct project financing is difficult to come by for private investors. They are attempting to obtain financial assistance through a financing lease or mortgage at a cost of 40–50 percent of the benchmark interest rates. The government should make it mandatory for state-owned banks to provide project financing to reputable developers.
The public’s involvement is critical to the long-term development and acceptance of renewable energy. According to studies, energy suppliers and end-users should have separate statutory obligations. China now enforces RE ratios on power producing businesses as well as carbon dioxide emission limits on major energy consumers.
The government should strongly consider implementing incentive measures for all energy customers, including individuals. With the use of big data technologies, personal income deductions for green power usage or the purchase of Green Certificates may be obtained.
The performance of UHV transmission technology in transporting REs to consumption centres is outstanding. One reviewer stated that UHV transmission line stability has to be improved, and that certain UHV transmission lines are operating at 50% capacity. As a result, UHV isn’t the only way to get rid of RE power restrictions. Participation in basic research and other roadmaps is recommended for research institutes and universities with a lot of R&D funding.
China is attempting to change its economic growth style in order to achieve long-term development. Dedicated to encouraging the deployment of REs is an unavoidable decision if the aspirational aim of carbon peak by 2030 and a 20% RE ratio is to be met, with solar PV power growth appearing to be the top priority. In light of the grid-parity period and present development status, a comprehensive study of solar PV power is required to study possible possibilities and obstacles, which is critical for long-term growth.
The above extract is based on a report by MDPI. The full report can be accessed by clicking here